On 29th December 2022, Law No. 175 of 2022 (the "Amendment") was published in the Official Gazette, amending Law No. 3 of 2005 on the Protection of Competition and Prohibition of Monopolistic Practices (the "Law"). The Amendment entered into effect on 30th December 2022, taking into consideration that the executive regulations of the Law (the "Executive Regulations") are yet to be updated to accommodate the Amendments.
The Amendment's Scope of Application
The Amendment replaces the previous post-merger notification obligation with a pre-merger control regime for transactions that would trigger 'Economic Concentration' that results from:
- merger of one or more persons with an existing person or two or more persons resulting in a new legal entity;
- direct or indirect acquisition of control or material influence by one or more persons over one or more persons or part thereof by virtue of an agreement, purchase of securities or assets, or any other means; or
- establishment of a joint venture or the acquisition by two or more persons of an existing person to establish a joint venture that carries out economic activity independently and permanently.
Subject to the thresholds provided under the added Amendment, the foregoing acts shall qualify as Economic Concentration for the purpose of merger control only if they result in:
- a direct or indirect change of Control of the person (s) by any means including control of economic decisions or voting rights; or
- a direct or indirect material influence of policy, strategic decisions or commercial objectives as will be detailed under the Executive Regulations.
As an exception, intra-group mergers and acquisitions for restructuring purposes shall normally not trigger the pre-merger notification obligation.
The Amendment's Entry into Force
On 4 January 2023, the Egyptian Competition Authority (ECA), issued an announcement confirming that parties of transactions consummated before the 30th of December 2022 are only required to submit the post-merger notification in accordance with its respective now repealed regime, i.e., are not addressed by the Economic Concentration pre-merger control regime.
ECA also expressly acknowledged that the Amendment cannot be effectively implemented until Executive Regulations are updated.
That said, it remains to be clarified by the ECA how it will handle transactions that were to be closed or executed between the 30th of December 2022 and the date on which the updated Executive Regulations will be issued, which is not confirmed by ECA either.
Meanwhile, the ECA announced that it will issue guidelines that will include allowing concerned parties to hold meetings with ECA to discuss the filing requirements before actual submission.
Egyptian Competition Authority's Control over Economic Concentration
The Amendment explicitly prohibits consummation of a qualifying transaction before a clearance by ECA is obtained. Pre-merger control regime under the Amendment applies if the following thresholds are met:
- A combined annual turnover or accumulated assets in Egypt of the concerned persons exceeds EGP 900 million provided that the annual turnover in Egypt of at least two concerned persons exceeds the amount of EGP 200 million each; or
- A combined annual turnover or accumulated assets worldwide of the concerned persons exceeds EGP 7.5 billion provided that the annual turnover in Egypt for at least one concerned person exceeds the amount of EGP 200 million.
The thresholds are calculated on the basis of the financial year preceding the concentration. The calculation methods are expected to be further elaborated in the Executive Regulations.
In certain cases, the Amendment grants the ECA the power to investigate Economic Concentrations that do not meet the foregoing thresholds within one year from its execution if it has evidence that it limits or harms the freedom of competition. Further details of such exception are yet to be specified in the Executive Regulations.
Fees, Timeline and Process of the Egyptian Competition Authority's Review
The fees for the ECA's inspection of the Economic Concentration notification is capped at EGP 100 thousand, in addition to the publishing costs borne by the applicant. The Executive Regulations are expected to determine such fees in more details.
The standard timeline for examining a notification is 30 working days from the day following the day on which the notification is filed. Such timeline may be extended by an additional 15 working days, subject to the details that will be provided in Executive Regulations. If ECA did not issue its decision within such timeline, the application shall be deemed approved.
Upon conducting the review, the ECA would decide on (i) its non-competence to review the filed notification; (ii) approval of Economic Concentration; (iii) conditional approval; or (iv) referral to a Second Examination if the Economic Concentration raises suspicions of limitation, restriction or harm of the freedom of competition.
If a referral to Second Examination phase is decided, this must be concluded within 60 working days from the day of such referral. The timeline may be extended by an additional 15 working days, subject to the details that will be provided in the Executive Regulations. If the ECA decision is not issued within the said timeline, the application shall be deemed approved.
A second examination phase shall result in a decision of (i) archiving the application, (ii) conditional approval; or (iii) rejection if the Economic Concentration is considered to limit, restrict or harm the freedom of competition.
The ECA decision of rejecting the Economic Concentration is subject to appeal within 30 days from the date of being notified to the concerned parties. The process and competent reviewing authority of such an appeal are yet to be detailed in the Executive Regulations.
Activities under FRA supervision
Notification of economic concentration in activities subject to the supervision of the Financial Regulatory Authority (FRA) are submitted to FRA under a different examination process and timeline.
Failure to notify the Economic Concentration, to abide by the ECA's Conditional Approval decision or rejection or obtaining an approval on economic concertation based on false or inaccurate data or documents, is punishable with a fine ranging between (1%) and (10%) of the total annual turnover, assets, or value of the operation of the persons subject matter of the Economic Concentration, whichever is higher.
In the event that such percentage cannot be calculated based on the last approved consolidated budget, the penalty shall range between EGP 30 million and EGP 500 million.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.